I'm wondering if anyone else is running into the same problem I am. I was medically retired at the end of 2010. This is the first year I am doing my taxes with retirement income. I noticed when I was filing, that block 7 on my 1099-R is a code 7 which means normal distribution as apposed to code 3 which is for disability income.
I believe this is due to the error in my 214 when I got out. It said that I voluntarily retired due to length of service. I had it fixed but I don't think DFAS fixed it on their end and it's still not showing as disability retirement. This may not seem like a big deal but as I tweaked with the tax program I found that with a code 7 in there, I'm not eligible for the Earned Income Credit but with a code 3 I am. For me, this is a difference of $8,000!
I think I should be eligible for it due to this IRS Publication 596. It says:
More info:
I'm not eligible for CRSC and I'm not yet getting VA comp.
I believe this is due to the error in my 214 when I got out. It said that I voluntarily retired due to length of service. I had it fixed but I don't think DFAS fixed it on their end and it's still not showing as disability retirement. This may not seem like a big deal but as I tweaked with the tax program I found that with a code 7 in there, I'm not eligible for the Earned Income Credit but with a code 3 I am. For me, this is a difference of $8,000!
I think I should be eligible for it due to this IRS Publication 596. It says:
I'm calling DFAS tomorrow to see if they need to change it but can anyone else tell me what their code is?Disability Benefits
If you retired on disability, taxable benefits you receive under your employer’s disability
retirement plan are considered earned income until you reach minimum retirement age.
Minimum retirement age generally is the earliest age at which you could have received a
pension or annuity if you were not disabled. You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum
retirement age.
Beginning on the day after you reach minimum retirement age, payments you receive are
taxable as a pension and are not considered earned income. Report taxable pension
payments on Form 1040, lines 16a and 16b, or Form 1040A, lines 12a and 12b.
More info:
I'm not eligible for CRSC and I'm not yet getting VA comp.